How the Brexit is likely to affect inbound U.S. travel

London

In late June, the United Kingdom voted to leave the European Union, and the British exit or “Brexit” referendum rattled the global business community and sent the pound plummeting.

The referendum’s effects will be far-reaching for a long time—particularly in Europe’s hospitality industry, but also in terms of U.S. hotels that cater to U.K. visitors.

British Hospitality Association CEO Ufi Ibrahim said that the biggest immediate impact of the Brexit on the global travel industry was the depreciation of the pound (“the fastest depreciation of the pound in the last 60 years,” she said) and increased uncertainty among investors. “We are looking at a revised downward growth projection for the rest of the year,” she said. “Possibly negative. That’s affecting consumer confidence.”

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Changing Trends

The U.K. is, and has been for years, the largest overseas inbound market in terms of travel to the U.S. At the same time, the U.K.’s Office of National Statistics reports that the U.S. has been the most popular non-European destination for U.K. travelers and third-most popular international destination overall for the past two years.

Those rankings may not change following the Brexit, but the overall numbers could. “Our estimate is that there will be half-a-million fewer U.K. travelers next year,” said David Huether, SVP for research at the U.S. Travel Association. “Before the Brexit, our forecast was that visitation from the U.K. would increase by 2 percent next year. Now we expect that it will fall by 5 percent.”

RELATED: Here's how the U.S. hotel industry is responding to the Brexit

The U.S. Travel Association has been keeping track of Internet searches for hotel rooms in the U.S. and noted a decrease from U.K.-based travelers even before the vote. “In the weeks leading up to Brexit, the share of overall searches for U.S. hotels emanating from the U.K. started to decline compared to the same time a year ago,” Huether said. “During the week of the Brexit, they tanked.” And while the number of U.K. residents searching—and booking—hotel rooms in the U.S. was still down, Huether said that one month after the vote, they were starting to come back—“a little bit.” The real impact on visitor numbers to the U.S., he said, would likely not be felt until the autumn and into 2017.

Big Visitors, Spenders

The U.S. Department of Commerce’s International Trade Administration reported that in 2015, inbound visitor numbers to the U.S. from the U.K. rose 18 percent to 4.9 million visitors. “Never before has the United States counted as many travelers from the United Kingdom as we did in 2015, finally eclipsing the previous record set back in 2000,” the 2015 Visitation and Spending report claimed. “Indeed, despite major declines facilitated by the global financial crisis in 2009 and three years thereafter, U.K. visitors are once again crossing the pond in record numbers. U.K. arrivals accounted for 6.3 percent of all international arrivals to the United States.”

New York City, the point of entry for more than 85 percent of inbound U.K. travelers to the U.S., reported 1,175,000 visitors from the U.K. in 2014, a 6-percent increase compared to 2013. After a “very slight” rise last year, the tourism board predicted 1,227,000 visitors for 2016, a year-over-year increase of nearly 3 percent—but this prediction was made weeks before the June vote. “It’s too soon to predict the impact the Brexit will have on NYC tourism,” Christopher Heywood of NYC & Company said, noting that people from the U.K. tend to book their international trips months in advance.

But while visitor numbers are up, spending from U.K. visitors has been on a decline for a while, the report claims. In 2008, just before the global financial crisis hit, the U.K. ranked third in total spending in the U.S. and was the top overseas market. Since then, however, annual U.K. visitor spending has decreased nearly $4 billion a year (a decline of 22 percent) and the $12.6 billion spent in 2015 is a five-year low.

And the new weakness of the pound compared to the dollar isn’t likely to help increase spending. “Their currency is worth less than it was a few months ago, [so] that means that their spending will not go as far,” Huether said. Still, he said, British travelers already set on visiting the U.S. may only adjust their plans rather than completely scrap them in favor of a less-expensive destination. “Instead of five days, they may stay for four days,” he said.

But for all the concern and attention the Brexit has generated, Huether also shared a reason why the American hotel industry may be in good shape in the long run: While the pound is weaker than it was, the Japanese yen is getting stronger. “In fact, over the last 12 months, the yen has increased in value against the dollar as much as the [British pound] has fallen,” Huether said. And after the U.K., Japan is the United States’ second-strongest market in terms of inbound tourism.

Even better? “Japanese people spend more than British people when they come here,” he said. “So there is a possibility that the negative impact on the travel industry [from] fewer U.K. travelers may be offset—to a degree—from improved inbound travel from Japan.”

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